Evaluation of Futurpreneur Canada

From: Innovation, Science and Economic Development Canada

Executive Summary

The evaluation assessed the relevance and performance of Futurpreneur Canada from 2012-13 to 2017-18 based on qualitative and quantitative research methods.

The evaluation found that there is a continued need for Futurpreneur. It is a unique national program that combines both financial and non-financial support to help address evolving youth employment challenges and barriers to business start-up. While other programs exist in the entrepreneurial ecosystem, they are often focused on a specific region or niche market/industry, and vary in their age eligibility, funding levels, and ability to stack funds. Futurpreneur works closely with partners across the country to complement other programs. 

Futurpreneur has provided loans to a diverse range of young entrepreneurs and the number of loans awarded have increased each year. Approximately 80% to 85% of all loans have been repaid since inception, indicating that the majority of young entrepreneurs who received Futurpreneur support have been able to repay their loans.

In addition to financial support, Futurpreneur has over 3,000 volunteers across Canada to support young entrepreneurs through a mandatory two-year mentorship program. Volunteer mentors are able to provide one-on-one guidance and advice regarding business operations, marketing or specialized areas of interest.

The evaluation could not assess longer term outcomes (e.g., the ability of young entrepreneurs to grow their businesses and contribute to the entrepreneurial ecosystem) due to data and performance measurement limitations. Although unavailable for the evaluation, in 2017-18, Futurpreneur committed to the collection of data that will facilitate assessment of longer-term outcomes.

During the evaluation period, Futurpreneur made changes to its delivery model. Prior to 2014-15, Futurpreneur relied heavily on community partners to attract and support young entrepreneurs to complete their loan applications for submission. As of 2014-15, Futurpreneur shifted to a more direct intake model where young entrepreneurs have the option to work directly with Futurpreneur staff support to prepare their applications. Overall, the evaluation found the transition to direct delivery has increased efficiency. However, the reduced role of community partners may be impacting levels and types of client service.

Futurpreneur has exceeded expectations to match federal funding with non-federal sources and has increasingly become more self-reliant by generating funds from sources such as loan repayments, interest and fees. However, federal funding has been provided through two-year funding cycles which may impact Futurpreneur's reach and ability to secure other sources of funds.

The findings from the evaluation led to the following recommendations:

1. ISED should work with Futurpreneur to establish a robust performance measurement regime that clearly defines short-, medium- and long-term outcomes, collects data on established metrics and considers additional indicators related to skills acquired by young entrepreneurs, in addition to the success of Futurpreneur businesses.
2. ISED and Futurpreneur should examine the impacts of the shift in delivery model on client service, including whether it impacts program reach in certain areas.
3. ISED should examine longer-term funding contribution options to support program stability and Futurpreneur's progress towards longer-term outcomes.

Acronyms

AEB

Audit and Evaluation Branch

BDC

Business Development Bank of Canada

CEO

Chief Executive Officer

CYBF

Canadian Youth Business Foundation

FC

Futurpreneur Canada

GoC

Government of Canada

ISED 

Innovation, Science and Economic Development Canada

OECD

Organization for Economic Co-operation and Development

RBC

Royal Bank of Canada

SBTMS 

Small Business, Tourism and Marketplace Services Sector

Background

Overview

Futurpreneur Canada, is a national, not-for-profit organization that provides financing, mentoring, and business support tools to young entrepreneurs between the ages of 18 and 39.

Since 1995, Futurpreneur Canada (FC), formerly known as the Canadian Youth Business Foundation (CYBF), has provided support to young people who see entrepreneurship as a viable career option, but who would not typically be supported by traditional lending institutions.   

The objectives of FC are to:

• Encourage and support young entrepreneurship in all regions of Canada;
• Support the economic and social advancement of young people by providing financial and other assistance to help them identify and develop business opportunities and enhance their employment and self-employment prospects;
• Develop, provide and promote employment and self-employment education and training programs for young people, and provide them with assistance to enable them to participate in such programs; and
• Promote the benefits of entrepreneurship for young people in the community in which they live.

FC delivers its programming through approximately 90 full-time employees and over 3,000 volunteer mentors. It is headquartered in Toronto and is governed by a Board of Directors comprised of 17 business leaders and entrepreneurs. The Board has two working committees, an Audit and Finance Committee and an Executive Committee. FC's Executive Leadership Team includes, among others, a Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer.

For more information, see Appendix A for the program logic model, Appendix B for FC's organizational structure, and Appendix C for FC's key milestones since inception.

"Young entrepreneurs flourish within a fully supportive Canada and create economic and social value for Canadians and the world."

– FC Vision^{Endnote 1}

Description

Futurpreneur provides financial and non-financial support to eligible recipients and businesses, regardless of industry sector, including:

Process Model

Futurpreneur works closely with young entrepreneurs to provide financial and non-financial support.

Pre-Registration

• Young Entrepreneur either works directly with FC (by contacting FC or being directed by a referral partner) or with a community partner to prepare and submit loan application

Registration

• Young Entrepreneur registers for Start-up Program: submits business profile, business plan and cashflow statement to FC
• FC supports Young Entrepreneur throughout the process

Application Review & Decision

• FC reviews business profile and eligibility, credit score, business plan and cash flow statement
• FC approves/denies application
• In addition, upon the recommendation of FC, BDC approves/denies application for its own program

Mentor-Mentee Matching

• Young Entrepreneur and Mentor are matched and complete mandatory orientation

Financial Disbursement

• Up to $15,000 disbursed by FC to Young Entrepreneur

Client Support

• FC conducts check-ins (30 days & 4 months)
• Mentor rematch request and assessment possible

Loan Repayment

• Young Entrepreneur has up to five years to repay their loan, though terms can be renegotiated with FC

Federal Funding

Through ISED, the Government of Canada contributed $103.5 million to Futurpreneur between 2001-02 and 2018-19.

FC is funded by the federal government, private foundations, businesses, provincial governments, and income earned from investments, fees, and loan interest. As well, FC receives in-kind contribution from other sources and organizations.

Overall responsibility for the federal contribution to FC lies with the Minister of Small Business and Export Promotion and is administered by ISED's Small Business and Marketplace Services (SBMS) Sector. The level and structure of the federal funding has evolved since 2001-02.

Methodology

Evaluation Context and Considerations

The objectives of this evaluation were to examine the relevance and performance of FC to inform program renewal.

The evaluation findings and recommendations were developed considering five evaluation questions:

Relevance

1. To what extent is there a continued need for FC? Do other programs duplicate (or complement) the objectives of FC?

Performance – Achievement of Expected Outcomes

2. To what extent do young entrepreneurs have access to financial and non-financial support to establish new businesses?

3. Do young entrepreneurs have the support and business results to successfully repay debt incurred?

4. To what extent are young entrepreneurs able to successfully continue and grow their businesses as a part of Canada's entrepreneurial ecosystem? What factors hinder or facilitate the achievement of FC outcomes?

Efficiency and Effectiveness

5. To what extent is the FC delivery model an efficient and effective approach to achieving its objectives?

Data Collection Methods

The evaluation was based on qualitative and quantitative research methods.

International Comparative Analysis

The comparative analysis examined how other countries provide financial and mentoring support to identify notable differences or alternative approaches (such as best practices or lessons learned) to supporting young entrepreneurship. KPMG collected data on programs in France, New Zealand, Australia, and the United States through interviews and reviewing public information. See Appendix C for more details.

Data Analysis

Performance, financial and administrative data (including data on recipients and mentors) collected by ISED and FC were analyzed to determine the extent to which the program is achieving its objectives and the extent to which the delivery model is effective and efficient.

Interviews

Interviews were conducted to gather information and perceptions on the relevance and effectiveness of the program, as well as to identify areas for improvement. In total, 18 interviews were conducted with ISED program staff, FC staff and Board members, community partners, strategic partners, volunteer mentors, non-recipients and subject matter experts.

Survey of FC Start-up Recipients

The survey of recipients captured quantitative and qualitative evidence to examine the achievement of expected outcomes, efficiency of program design and areas for improvement. The survey received 315 responses, including 306 current recipients, and 9 past recipients of FC support.

Literature and Document Review

This review facilitated assessment of the continued need, progress toward program objectives, and program delivery model. The evaluation team reviewed academic literature related to the need for entrepreneurial support programs targeted to youth and the key issues and trends affecting youth entrepreneurs in Canada and around the world. Additionally, the team analyzed federal government priority setting documents, contribution agreements, research papers, past surveys, FC program report documents, and previous reviews.

Research Limitations

Findings: Relevance

There is a continued need for Futurpreneur as it addresses evolving youth employment challenges and barriers to business start-up. Futurpreneur is a unique national program that combines both financial and non-financial support for youth. It cultivates partnerships to complement other programs in the entrepreneurial ecosystem.

Overall, over 60% of Canadian youth see entrepreneurship as a good career choice and over 70% associate it with high status.

– GEM Canada Report on Youth Entrepreneurship 2017^{Endnote 2}

Youth face significant employment challenges and there is a need to address these.

Challenges and barriers to youth employment include high unemployment rates (double the rate of adults)^{Endnote 3}, lower wages (wages of young full-time employees have declined since the early 1980s)^{Endnote 4} and a stronger demand for soft skills due to the changing nature of work. Technological advancements, globalization, and the transition to a knowledge economy has led to a stronger emphasis on critical thinking, interpersonal, problem solving and communication skills.^{Endnote 5}

Youth are more likely to seek debt financing than other Canadians (42.1% for those under 30 and 31% for those aged 40-49).^{Endnote 6} However, evidence shows that youth entrepreneurs face unique difficulties in accessing financing from traditional institutions because they are considered high-risk due to lack of collateral, student debt and limited credit history.^{Endnote 7}

Evidence indicates that there is demand for FC.

FC provides financial support based on "character not collateral" which allows the program to reach those who may be considered high-risk by traditional lending institutions such as private sector banks. 79% of FC recipients surveyed agreed that FC support is "very or extremely" important to address financial challenges that youth face in business start-up. Based on loan application submissions, demand for FC grew by 19% from 2012-13, to 2016-17. 

As well, an OECD study (2017) noted that a good practice from Futurpreneur is the combination of finance with one-on-one mentoring and suggests that FC is a successful initiative that has opportunities to expand its network of partners and scale up its reach among young Canadian entrepreneurs.^{Endnote 8}

Findings: Achievement of Expected Outcomes

Financial Support

Futurpreneur has been successful in providing loans to a diverse range of young entrepreneurs. The number of loans awarded have increased each year, although there may be challenges with reach in some provinces and rural areas.

Loan Repayment

Overall, the majority of young entrepreneurs who received Futurpreneur support have been able repay their loans.

Non-Financial Support

"Mentors contribute to entrepreneurs by supporting the development of skills in both business operations and personal effectiveness."^{Endnote 16}

The mentor-mentee relationship varies broadly as it is specific to the recipients' needs. Overall, the mentorship program is viewed positively.

70% of survey respondents felt their mentor was accessible and more than 60% of respondents said their mentor was encouraging or shared valuable business knowledge and advice. However, there were regional variations, especially in the Prairie and Atlantic regions where respondents were less satisfied. For example, 29% of respondents from the Prairies and 25% of those from Atlantic disagreed that mentors provided the support needed for businesses. As well, 33% of respondents from the Prairies disagreed that their mentor was a good match. 

Interviews with mentors noted overall positive experiences with the mentorship program and administrative data shows that over 68.9% of mentors have had more than one past mentee, with 13% having three or more past mentees.

Additional non-financial support is offered through FC's Business Resource Centre (BRC).

The BRC is a publicly available platform that provides young entrepreneurs with easy, on-line access to a range of business tools. With more than 2.4 million views and 117,000 downloads, the Business Plan Writer is one of the most popular tools referred to by interviewees and well regarded by survey respondents. This tool is also promoted regularly by universities and community employment offices. Data on the use of the business resource centre tools may be underestimated as counts only reflect visits where users have started and completed modules in chronological order.

Achievement of Longer-term Outcomes

Performance measurement and data challenges do not allow for assessment of the ability of young entrepreneurs to grow their businesses and contribute to Canada's entrepreneurial ecosystem.

To date, ISED reporting requirements have focused primarily on output measures such as the value of loans and characteristics of recipients. As well, data on longer-term metrics such as jobs created and business survival rate rely solely on self-reported data from youth recipients. In general, surveys have yielded low response rates from recipients and the greatest response has been from those who are still in the program or have recently completed it. As such, self-reported data may not be accurate nor representative of all recipients.

New longer term, outcome-focussed metrics were added to the funding agreement beginning in 2017-18. These metrics focus on the success of FC businesses and include:

• loan repayment rates;
• 5-year survival rate of FC start-ups;
• number of jobs created; and,
• percentage of FC businesses exporting.

FC also committed to collecting business numbers of young entrepreneurs who received FC loans to trace and collect long-term business information (e.g., number of employees, sales, etc.). At the time of the evaluation, this was not yet in place.

While some longer-term outcomes and indicators have recently been defined, consideration should also be given to additional metrics of success, such as the employment skills and competencies that youth build through the entrepreneurship experience. Evidence shows that entrepreneurs tend to be dynamic, in some cases moving from one business start-up to another, partnering with others, or seeking part-time endeavours (i.e., side-hustles).^{Endnote 18} A 2017 GEM report notes that exploring whether youth pursue another entrepreneurial venture, choose a salaried position, or become unemployed, would help to understand whether or not youth leave or remain in a broader part of the entrepreneurial ecosystem.^{Endnote 19} Tracking the longer-term success of young entrepreneurs in addition to businesses would provide a more complete picture of the impact of FC.

Findings: Efficiency and Effectiveness

FC Delivery Model

FC Funding

FC obtains funds from three primary sources: donors (including multiple levels of government and corporations), loan repayments, and since 2015-16, a line of credit.  Prior to obtaining the line of credit, FC was heavily reliant on federal funding to disburse loans and deliver the program. With the line of credit, federal funding is now used for business supports including mentoring, outreach initiatives and the organization's operations. 

FC also works with sponsors such as universities to collaborate on targeted projects with specific goals. For example, Dalhousie University provided funding to FC for specific activities (a conference and two workshops) to youth entrepreneurs in Nova Scotia with the goal of retaining youth and creating jobs in the province.

A review of annual reports to ISED shows that FC has met administrative cost targets (10% of federal contribution).

Since 2013-14, FC has exceeded the expectations set out in federal funding agreements to increase its funding from non-federal sources. Non-federal sources have been defined as contributions from other levels of government, sponsorships from corporations and other organizations, as well as interest, fees and in-kind contributions.

Non-federal funds raised per $1.00 of federal contribution

	2011-12 to 2012-13*	2013-14 to 2014-15	2015-16 to 2016-17	2017-18
Target	$0.75	$0.83	$1.00	$1.00
Actual	$0.73	$1.44	$1.69	$1.73

* FC changed reporting cycles to align with government fiscal years (April 1 – March 31) which also affected the reporting of funds raised.

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Since inception, federal funding to FC has been allocated on a short-term basis.

As of 2011-12, federal funding to FC has been allocated on a two-year basis. This is atypical for a mature program and evidence indicates that the brevity of agreements may be impacting FC. Shorter agreements limit the ability of FC to define and demonstrate long-term progress. Two-year federal funding cycles also fosters uncertainty rather than stability in partnership development for funding and collaboration, as other donors to FC may not want to make longer term investments without guarantee of the federal contribution.

A 2017 OECD report noted that with longer-term funding, FC could play a role in addressing the challenge of business succession planning faced by developing and funding youth successors.^{Endnote 23} Interviewees also noted that two-year cycles are often too short to plan and deliver major initiatives (such as focused outreach to under-represented groups) and the continuous renewal cycle diverts human and financial resources from both ISED and FC.

Conclusions

Based on qualitative and quantitative lines of evidence, the evaluation led to seven findings on the relevance and performance of Futurpreneur Canada.

Relevance

• There is a continued need for Futurpreneur as it addresses evolving youth employment challenges and barriers to business start-up.  Futurpreneur is a unique national program that combines both financial and non-financial support for youth. It cultivates partnerships to complement other programs in the entrepreneurial ecosystem.

Achievement of Expected Outcomes

• Futurpreneur has been successful in providing loans to a diverse range of young entrepreneurs.  The number of loans awarded have increased each year, although there may be challenges with reach in some provinces and rural areas.
• Overall, the majority of young entrepreneurs who received Futurpreneur support have been able repay their loans.
• Futurpreneur's mentorship program and business resource centre provide recipients with access to mentor advice and guidance, as well as a range of online business support services.
• The evaluation could not assess if young entrepreneurs were able to grow their businesses and contribute to Canada's entrepreneurial ecosystem due to data and performance measurement limitations.

Efficiency and Effectiveness

• Overall, the transition to direct delivery has increased efficiency. However, the reduced role of community partners may be impacting the quality of client service.
• Futurpreneur has exceeded expectations of funding from non-federal sources. It has also increased its self-reliance. However, the two-year federal funding cycles may impact FC's reach and ability to secure other sources of funds.

Recommendations

The findings of the evaluation led to the following recommendations.

1. ISED should work with Futurpreneur to establish a robust performance measurement regime that clearly defines short-, medium- and long-term outcomes, collects data on established metrics and considers additional indicators related to skills acquired by young entrepreneurs, in addition to the success of Futurpreneur businesses.
2. ISED and Futurpreneur should examine the impacts of the shift in delivery model on client service, including whether it impacts program reach in certain areas.
3. ISED should examine longer-term funding contribution options to support program stability and Futurpreneur's progress towards longer-term outcomes.

Appendices

Appendix A: Futurpreneur Canada Logic Model

Appendix B: Futurpreneur Organizational Structure

Note: This organizational chart represents the structure of FC during the conduct phase of the evaluation (July 2018). It should be noted that the organizational structure has since changed.

Appendix C: Overview of FC Key Milestones and Support

Appendix D: International Comparators

Australia – Foundation for Young Australians	France – Adie	New Zealand – Young Enterprise	United States of America – Youth Business USA
Description
Not-for-profit organization that focuses on improving youth opportunities for enterprising and innovation. Program supports development of enterprise and leadership skills, micro-funding and mentoring.	Non-governmental organization focussed on supporting all age groups who do not have access to traditional labour markets. Program advocates for legislative and regulatory framework for micro-funding and self-improvement, provides micro-financing instruments, and business support services to enhance business sustainability (mentoring).	Charity organization that focusses on enterprise and financial education for students (Grades 1-13) to facilitate discovery of business potential. Program makes use of teachers and business community to develop entrepreneurial knowledge and business enterprise experiences.	Not-for-profit organization serving under-represented, young adults who face barriers to business ownership and living wage jobs. Program focusses on entrepreneurial education and one-on-one coaching. Program seeks availability of competitive pools of investor funding.
Target Sector and Scope
Sector agnostic and are open to any young entrepreneur that meets eligibility criteria. Target underrepresented groups such as those in rural areas, welfare recipients, teen parents and those with lower levels of education with some specific programming.
Client Age Group
12-29	All ages including special programming (Creajeunes) designed for youth 18-32.	5-24	18-29
Staffing Model
Employs mixed model of staffing – permanent staff and large volunteer networks. Staff are distributed across the country and work mainly with community partners	Employs mixed model of staffing – permanent staff and large volunteer networks. One-fifth are headquarters staff, remainder are distributed across the country and are responsible for developing partnerships, finding mentors, volunteers, technical expertise, and working with entrepreneur clients.	Employs mixed model of staffing – permanent staff and large volunteer networks. Staff are distributed across the country to provide experiential learning, but teacher network delivers classroom resources and programs.	Employs small, central staff to support electronic delivery of education modules via its technology platform.